Healthcare, Insurance, Smart Spending

Health Insurance Exchange Promotes Competition

The Affordable Care Act has been called many things, including anti-competitive, socialist, and a whole host of anti-market synonyms.  However, it appears that the creation of the health insurance exchanges have also promoted greater transparency on healthcare plans.  The news coming out of the ACA isn’t all good as, in some states, healthcare premiums are going to rise due to demographics and plans that are more comprehensive than the minimal plans that existed before.  However, with some fairly solid guidelines on what is a bronze, silver, gold, and platinum plan on state health insurance exchanges, the transparent pricing has introduced a greater level of competition into the market.

This is because the ACA, with it’s guidelines on what constitutes a bronze, silver, gold, and platinum plan, has allowed the ability for people to compare healthcare insurance costs not only across states but also between different healthcare providers.  As a result, more people will be able to determine which healthcare plan is the most cost effective of all the healthcare plans out there.  Instead of having to search through different healthcare websites and breakdown the cost and benefits of each type of plan, the health insurance exchanges will make comparing similar plans fairly easy.  Furthermore, this accessibility will encourage more price competition in the market.

Of course, the argument that the Affordable Care Act is anti-competitive can still be made as it does present regulation into the market.  However, the problem with assumptions about the market is that most basic models assume that everyone knows the same amount.  However, this is simply not true.  Insurance companies don’t publish how much it costs to insure individuals or their mathematical models.  As a result, consumers are at a profound disadvantage in the market.  Like most good regulations, the health insurance exchanges promote price comparison and greater transparency.

Furthermore, since more people have to enter the insurance market, it means that price competition will be much greater.  The reason why this happens is because profit margins on insurance are predictably higher when there are more people in the same insurance pool.  So, it’ll be to the benefit of every insurer out there to enroll as many people as possible in their insurance pools.  Since the health insurance mandate will eventually compel nearly everyone to sign up for insurance, that means that the market will bottom out after a couple of years (there are only so many people in the US) and health care insurers will be competing for existing customers as opposed to new customers.

As a result, this will likely lower the average cost of health insurance and healthcare for everyone in the US in the long run because market forces will encourage greater competition.  In New York, health care costs for many are likely to decrease.  This may be to the detriment of health insurance providers as their sizable profit margins may shrink, but it will make the US a healthier place.  Furthermore, health care costs may decrease in the future as more and more individuals will be able to take preventative care measures.  As a result, the health insurance exchanges of the ACA will most likely promote competition in favor of the average consumer, bettering the lives of the average American.